US-China trade tensions dominate markets, dollar edges higher, stock and bond yields are lower
Scott Petruska, CFA | May 7, 2019
China’s top trade negotiator Liu He plans to visit the US May 9-10 for a new round of high stakes talks in the face of President Trump’s tweets last Friday, threatening to hike tariffs on Chinese goods. The dollar edged higher across the board overnight. Chinese equities gained, but other Asian and European equities fell. US S&P futures indicate a lower open today. UST 10-yr yields dropped to 2.47%.
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May 7, 2019
EUR/USD 1.1179 GBP/USD 1.3048 USD/CAD 1.3478 AUD/USD 0.7007 USD/JPY 110.57 USD/CNH 6.7923 USD/ILS 3.5893 USD/MXN 19.0788 USD/CHF 1.0207 USD/INR 69.4300
The dollar is higher overnight, but less than 0.2% against most currencies. The only gainer versus the dollar was the AUD. There is little economic news today to affect markets. UST 10-yr yields moved lower to 2.47%. Commodity prices, including oil, dropped amid concerns that global trade will decline.GBP
Amid various Brexit-related talks taking place this week, the UK pound has dropped back below $1.31. At the same time, currency option traders have become the most optimistic about the GBP in five months, as confidence grows that talks between the Labour Party and the ruling Conservatives will end in success.EUR
The euro has dropped under $1.12 amid trade tensions and disappointing German industrial orders. Germany’s 10-year bond yields dropped into negative territory after March orders came in weaker than expected, and after the European Commission cut its economic growth forecasts for the Eurozone, citing escalating trade tensions as a significant threat.CAD
Lower oil prices and US-China trade tensions dominate trading in the Canadian dollar, but it continues to trade well within its month-old 1.34-1.35 range.ASIA/PACIFICThe Chinese yuan made minor gains overnight; however, offshore CNH remains weak, as speculators have been buying USD/CNH in anticipation of a move by China to weaken its currency in reaction to US tariff pressures.
The Australian dollar jumped after the Reserve Bank of Australia was less dovish than traders had expected. The RBA left its policy unchanged at 1.5%. Many traders had been expecting a rate cut.
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